Julie Jason: The time to look at the cost of college

Published
12:00 am EDT, Sunday, September 10, 2017

Everyone needs a college funding plan.

The average cost of tuition and fees for the 2016-2017 school year was $33,480 for private colleges ($9,650 for public colleges), according to the College Savings Plans Network. That does not include room and board and all the other costs that go into having a college experience.

Since September is College Savings Month, there is no better time for parents and students to think about and talk through the costs (and benefits) of a college education — it’s potentially a huge financial obligation for a family. A conversation is the starting point; the end game is a family college funding plan.

Here are my thoughts on what the conversation should include:

1) the nature and cost of an education that leads to a meaningful career (yes, a career should be the goal for most people, with the exception of those who are wealthy and socially secure);

2) the source of funds to pay for the education (savings, loans);

3) whose financial obligation it is, the child’s or the parents’ (or both);

4) if the family believes it is the parents’ obligation to pay for the child’s college, should the child’s career choice be guided or determined by the parents (this is tongue-in-cheek, of course, but it can give a family some perspective);

5) the source of funds if it is the parents’ financial obligation (some families don’t have the financial wherewithal to take on the obligation);

6) the source of funds if it is the child’s financial obligation (some families believe children need to be financially independent at a certain age);

7) how the family feels about the parents and/or the student borrowing money to pay for college (taking on debt for a college education is a big decision; pros and cons need to be understood and weighed);

8) if student loans are included in the package, when will they be repaid (the decision to borrow has long-term implications; if this is not part of the dialogue, how can a good decision be made addressing the costs and benefits of college and where it leads?);

9) whether college will lead to graduate school or a job (again, it is essential to understand the end game);

10) what circumstances might arise that would require a change of plans (for example, a decision not to go to college, or a tragic illness or death of a parent).

No one should assume that a big financial obligation such as college will work itself out. Preparation is essential.

Recent survey data of parents in their 20s, 30s and 40s show that they are thinking about their children’s college expenses.

According to the College Savings Foundation’s 11th Annual State of College Savings, 83 percent of those surveyed are saving for their children’s college.

A large number (46 percent) are still burdened with their own student debt. One in three of those surveyed still owed between $20,001 and $30,000.

Ninety percent of parents with unpaid student loans appreciated the importance of saving for college.

Who are these parents? The 800 people surveyed included parents ages 21 through 45 across the country and evenly divided across income levels.

Looking at the savers more closely, here are some important facts uncovered by the survey:

1) 71 percent saved more than $5,000 per child;

2) 75 percent are saving on a regular basis;

3) 38 percent saved more this year than last.

As to borrowing, a large number (54 percent of all respondents) plan to borrow to finance their children’s college. Some parents are considering ways to lower costs by suggesting community college for two years and then transferring to a four-year college (29 percent), living at home (22 percent) and attending a state school (15 percent).

And who says college is for everyone? Twenty-eight percent of parents surveyed believe their children might not enroll. About 48 percent of those said that “they didn’t want their parents to bear the burden of college costs and they believe their career goals could be achieved without college.”

The College Savings Foundation is a Washington, D.C.-based not-for-profit organization helping American families save for higher education. For more information and an infographic on these findings, please go to www. collegesavingsfoundation.org.

One more point: Only about one out of three saver-parents used 529 college savings plans as their primary college savings vehicle. Next week, we’ll talk more about 529 plans.

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